Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations, as well as other sections in this Quarterly Report on Form 10 Q, should be read in conjunction with our unaudited interim consolidated financial statements and related notes thereto included elsewhere herein. In addition to historical financial information, some of the information contained in the following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts, including statements regarding our future results of operations and financial position, business strategy, current and prospective products, product approvals, research and development costs, current and prospective collaborations, timing and likelihood of success, plans and objectives of management for future operations and future results of current and anticipated products, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as "may," "will," "would," "should," "expect," "plan," "design," "anticipate," "could," "intend," "target," "project," "contemplate," "believe," "estimate," "predict," "potential," "outlook" or "continue" or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described under the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K filed with the SEC on March 27, 2025. These risks and uncertainties include, without limitation, risks and uncertainties related to: the effect of the transaction with Greenbrook on our business relationships; operating results and business generally; our ability to execute our business strategy; our ability to achieve or sustain profitable operations due to our history of losses; our reliance on the sale and usage of our NeuroStar Advanced Therapy System to generate revenues; the scale and efficacy of our salesforce; our ability to retain talent; availability of coverage and reimbursement from third-party payors for treatments using our products; physician and patient demand for treatments using our products; developments in respect of competing technologies and therapies for the indications that our products treat; product defects; our revenue has been concentrated among a small number of customers; our ability to obtain and maintain intellectual property protection for our technology; developments in clinical trials or regulatory review of the NeuroStar Advanced Therapy System for additional indications; developments in regulation in the U.S. and other applicable jurisdictions; the terms of our credit facility; our ability to successfully roll-out our Better Me Provider Program on the planned timeline; our self-sustainability and existing cash balances; and our ability to achieve cash flow breakeven in the third quarter of 2025. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. The Company cautions investors not to place undue reliance on these forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for us to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q as a result of any new information, future events or changed circumstances or otherwise.

Overview

We believe that mental health is as important as physical health. As a global leader in neuroscience, we are delivering more treatment options to patients and healthcare providers by offering exceptional in-office treatments that produce extraordinary results. Our first commercial product, the NeuroStar Advanced Therapy System, is a non-invasive and non-systemic office-based treatment that uses TMS to create a pulsed, MRI-

strength magnetic field that induces electrical currents designed to stimulate specific areas of the brain associated with mood. The system is cleared by the FDA to treat adult patients with MDD that have failed to achieve satisfactory improvement from prior antidepressant medication in the current MDD episode. It is also cleared by the FDA as an adjunct for adults with OCD and for adolescent patients aged 15-21 with MDD. The NeuroStar Advanced Therapy System is also available in other parts of the world. NeuroStar Advanced Therapy System is safe, clinically effective, reproducible and precise and we believe is supported by the largest clinical data set of any competing TMS system. We believe we are the market leader in TMS therapy based on over 209,215 global patients treated with over 7.6 million of our treatment sessions through June 30, 2025. We generated revenues of $38.1 million and $16.5 million for the three months ended June 30, 2025 and 2024, respectively, and $70.1 million and $33.9 million for the six months ended June 30, 2025 and 2024, respectively.

We designed the NeuroStar Advanced Therapy System as a non-invasive therapeutic alternative to treat patients who suffer from MDD and to address many of the key limitations of existing treatment options. Additionally through our acquisition of Greenbrook, we now derive revenue directly from our treatment centers, by providing TMS therapy and SPRAVATO for MDD and other mental health disorders. We derive the majority of our revenues from clinic revenue.

We generate revenues from initial capital sales of our systems, sales of our recurring treatment sessions and from service and repair and extended warranty contracts.

For the three months ended June 30, 2025, revenues from sales of our clinic revenue, treatment sessions and NeuroStar Advanced Therapy Systems represented 61%, 29% and 9% of our U.S. revenues, respectively. For the six months ended June 30, 2025, revenues from sales of our clinic revenue, treatment sessions and NeuroStar Advanced Therapy Systems represented 60%, 29% and 9% of our U.S. revenues, respectively.

Clinic revenue consists of revenue attributable to the performance of treatments to patients in 15 states in the U.S. In circumstances where the net patient fees have not yet been received, the amount of revenue recognized is estimated based on an expected value approach. Due to the nature of the industry and complexity of our clinic revenue arrangements, where price lists are subject to the discretion of payors, variable consideration exists that may result in price concessions and constraints to the transaction price for the services rendered.

Clinic revenue reimbursements are derived from third-party payors including federal and state agencies (under the Medicare programs), managed care health plans and commercial insurance companies.

We currently sell our NeuroStar Advanced Therapy System and recurring treatment sessions in the U.S. through our sales and customer support team. Our sales force targets an estimated 53,000 psychiatrists across 26,000 practices. We expect to continue to expand our direct sales and customer support team to further penetrate the market by demonstrating the benefits of our NeuroStar Advanced Therapy System to psychiatrists and their MDD patients. Some of our customers have purchased or may purchase more than one NeuroStar Advanced Therapy System. Based on our commercial data, we believe psychiatrists can recoup their initial capital investment in our system by providing a standard course of treatment to approximately 12 patients. We believe psychiatrists can generate approximately $8,500 of average revenue per patient for a standard course of treatment, which may provide meaningful incremental income to their practices. We have a diverse customer base of psychiatrists in group psychiatric practices in the U.S. Patients are reimbursed by federal healthcare programs and the vast majority of commercial payors in the U.S. for treatment sessions utilizing our NeuroStar Advanced Therapy System. For the three months ended June 30, 2024, one customer, Greenbrook, accounted for 14% of the Company's revenue. Following the acquisition of Greenbrook, there are no significant customers.

We market our products in a few select markets outside the U.S. through independent distributors. International revenues represented 1% and 2% of our total revenues for the three months ended

June 30, 2025 and 2024, respectively and 1% and 3% for the six months ended June 30, 2025 and 2024, respectively. We expect our international revenues to decrease as a percentage of our total revenue.

Our research and development efforts are focused on the following: hardware and software product developments and enhancements of our NeuroStar Advanced Therapy System and clinical development relating to additional indications. We outsource the manufacture of components of our NeuroStar Advanced Therapy Systems that are produced to our specifications, and individual components are either shipped directly from our third-party contract manufacturers to our customers or consolidated into pallets at our Malvern, Pennsylvania facility prior to shipment. Final installation of our NeuroStar Advanced Therapy Systems occurs at the customer site.

Total revenues increased by $21.6 million, or 132%, from $16.5 million for the three months ended June 30, 2024 to $38.1 million for the three months ended June 30, 2025 and increased by $36.2 million, or 107%, from $33.9 million for the six months ended June 30, 2024 to $70.1 million for the six months ended June 30, 2025. The increase was primarily attributable to an increase in clinic revenue.

We incurred net losses of $9.8 million and $22.5 million for the three and six months ended June 30, 2025 compared to net losses of $9.8 million and $17.7 million for three and six months ended June 30, 2024. As of June 30, 2025, we had an accumulated deficit of $442.6 million.

Global Economic Conditions

We are continuing to closely monitor macroeconomic impacts, including, but not limited to, developments affecting financial institutions, supply chains, trade and tariff policy, unemployment rates, investment values, consumer confidence, inflationary and potential recessionary pressures, on our business, results of operations and financial results, which could adversely affect us.

Components of Our Results of Operations

Revenues

We have generated revenues primarily from the sale of our NeuroStar Advanced Therapy Systems and related sales and rentals of the NeuroStar Advanced Therapy System, clinic revenue and the recurring revenues from our sale of treatment sessions in the U.S.

Clinic Revenue. Clinic revenue is determined based on net patient fees, which includes estimates for contractual allowances and discounts. Net patient fees are estimated using an expected value approach where management considers such variables as the average of previous net patient fees received by the applicable payor and fees received by other patients for similar services and the Company's best estimate leveraging industry knowledge and expectations of third-party payors' fee schedules. We expect clinic revenue to increase in 2025.

NeuroStar Advanced Therapy System Revenues. NeuroStar Advanced Therapy System revenues consist primarily of sales or rentals of a capital component, including equipment upgrades to the initial sale of the NeuroStar Advanced Therapy System. NeuroStar Advanced Therapy Systems can be purchased outright or on a rent-to-own basis by certain customers.

Treatment Session Revenues. Treatment session revenues primarily include sales of treatment sessions and SenStar treatment links. The treatment sessions are access codes that are delivered electronically in the U.S. The SenStar treatment links are disposable units containing single-use access codes that are sold and used outside the U.S. Access codes are purchased separately by our customers, primarily on an as-needed basis, and are required by the NeuroStar Advanced Therapy System in order to deliver treatment sessions.

Other Revenues. Other revenues are derived primarily from service and repair, research collaboration agreements and extended warranty contracts with our existing customers.

Refer to the section titled "Critical Accounting Policies and Use of Estimates-Revenue Recognition" in our Annual Report on Form 10-K filed with the SEC on March 27, 2025. Also, refer to "Summary of Significant Accounting Policies" in Notes to Interim Consolidated Financial Statements located in Part I - FINANCIAL INFORMATION, Item 1. Financial Statements.

Cost of Revenues and Gross Margin

Cost of revenues primarily consists of the costs of components and products purchased from our third-party contract manufacturers of our NeuroStar Advanced Therapy Systems as well as the cost of treatment packs for individual treatment sessions. We use third-party contract manufacturing partners to produce the components for and assemble the completed NeuroStar Advanced Therapy Systems. Cost of revenues also includes costs related to personnel, royalties, warranty, shipping, amortization of capitalized software and our operations and field service departments. Our treatment center costs include direct center and patient care costs, regional employee compensation, regional marketing expenses, and depreciation. We expect our cost of revenues to increase mainly for treatment centers, as our product mix changes.

Our gross profit is calculated by subtracting our cost of revenues from our revenues. We calculate our gross margin as our gross profit divided by our revenues. Our gross margin has been and will continue to be affected by a variety of factors, primarily product sales mix, pricing and third-party contract manufacturing costs. Our gross margins on revenues from sales of NeuroStar Advanced Therapy Systems and clinic revenue are lower than our gross margins on revenues from sales of treatment sessions and, as a result, the sales mix between NeuroStar Advanced Therapy Systems, clinic revenues and treatment sessions can affect the gross margin in any reporting period.

Sales and Marketing Expenses

Sales and marketing expenses consist of market research and commercial activities related to the sale of our NeuroStar Advanced Therapy Systems and treatment sessions and personnel costs including salaries and related benefits, sales commissions and share-based compensation for employees focused on these efforts. Other significant sales and marketing costs include conferences and trade shows, promotional and marketing activities, including direct and online marketing, practice support programs, primarily digital media campaigns, travel and training expenses.

We anticipate that our sales and marketing expenses will increase in 2025 relative to 2024 as a result of the addition of the Greenbrook sales and marketing related expenses.

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General and Administrative Expenses

General and administrative expenses consist primarily of personnel expenses, including salaries and related benefits, share-based compensation and travel expenses, for employees in executive, finance, information technology, legal, compliance and human resource functions. General and administrative expenses also include the cost of insurance, outside legal fees, accounting and other consulting services, audit fees from our independent registered public accounting firm, board of directors fees and other administrative costs, such as corporate facility costs, including rent, utilities, depreciation and maintenance not otherwise included in cost of revenues.

We anticipate that our general and administrative expenses will increase in 2025 from 2024 due to an increase in the overall size of the general and administrative function within the consolidated company.

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Research and Development Expenses

Research and development expenses consist primarily of personnel expenses, including salaries and related benefits and share-based compensation for employees in clinical development, product development, regulatory and quality assurance functions, as well as expenses associated with outsourced professional scientific development services and costs of investigative sites and consultants that conduct our preclinical

and clinical development programs. We typically use our employee, consultant and infrastructure resources across our research and development programs.

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We expect our research and development expenses to decrease during 2025 compared to our 2024 expenses.

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Interest Expense

Interest expense consists of cash interest payable under our credit facility and the amortization of deferred financing costs related to our indebtedness.

Other Income, Net

Other income, net, consists primarily of interest income earned on our money market account balances and notes receivable.

Results of Operations

Comparison of the three months ended June 30, 2025 and 2024

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Revenues

Total revenue for the three months ended June 30, 2025 was $38.1 million, an increase of 132% compared to the three months ended June 30, 2024 revenue of $16.5 million. During the quarter, total U.S. revenue increased by 133% and international revenue decreased marginally compared to prior year quarter.

The revenue growth was primarily due to the inclusion of clinic revenue of $23.0 million as a result of the acquisition of Greenbrook, partially offset by the absence of sales to Greenbrook of $2.3 million. Additionally, revenue from customers excluding Greenbrook increased by $0.9 million, driven by higher sales of treatment sessions.

U.S. NeuroStar Advanced Therapy System revenue for the three months ended June 30, 2025 was $3.5 million, a decrease of 13% compared to the three months ended June 30, 2024 revenue of $4.0 million. For the three months ended June 30, 2025 and 2024, the Company sold 41 and 49 systems, respectively, that were recognized as NeuroStar Advanced Therapy System capital revenue during each period. While the number of systems decreased, the average selling price per system increased by 6%.

U.S. treatment session revenue for the three months ended June 30, 2025 was $10.8 million, a decrease of 8% compared to the three months ended June 30, 2024 revenue of $11.7 million. The decline was primarily attributable to the absence of $2.1 million in treatment session revenue to Greenbrook associated with the prior year quarter, which was partially offset by an increase in treatment session volume with other customers, over the prior year quarter.

Cost of Revenues and Gross Margin

Cost of revenues increased by $16.1 million, or 376%, from $4.3 million for the three months ended June 30, 2024 to $20.4 million for the three months ended June 30, 2025. Gross margin decreased from 74.0% for the three months ended June 30, 2024 to 46.6% for the three months ended June 30, 2025. The decrease in gross margin was primarily a result of the inclusion of Greenbrook's clinic business and reduction in treatment session revenue.

Sales and Marketing Expenses

Sales and marketing expenses decreased by $0.4 million, or 4%, from $12.3 million for the three months ended June 30, 2024 to $11.9 million for the three months ended June 30, 2025. The decrease was primarily due to lower bad debt expense, partially offset by higher marketing program spend due to the inclusion of Greenbrook marketing.

General and Administrative Expenses

General and administrative expenses increased by $6.1 million, or 98%, from $6.1 million for the three months ended June 30, 2024 to $12.2 million for the three months ended June 30, 2025. The increase was primarily driven by the addition of Greenbrook general and administrative expenses of $6.1 million.

Research and Development Expenses

Research and development expenses decreased by $0.4 million, or 20%, from $2.2 million for the three months ended June 30, 2024 to $1.8 million for the three months ended June 30, 2025. The decrease in research and development was driven by personnel expense savings related to restructuring after the Company's acquisition of Greenbrook.

Interest Expense

Interest expense was marginally consistent at $2.0 million for the three months ended June 30, 2025 and June 30, 2024.

Other Income, Net

Other income, net decreased by $0.5 million, or 71%, from $0.7 million for the three months ended June 30, 2024 to $0.2 million for the three months ended June 30, 2025, primarily as a result of decreased interest income earned on the Company's money market accounts and notes receivable interest.

Comparison of the six months ended June 30, 2025 and 2024

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Total revenue for the six months ended June 30, 2025 was $70.1 million, an increase of 107% compared to the six months ended June 30, 2024 revenue of $33.9 million. During the six months ended June 30, 2025, total U.S. revenue increased by 110% and international revenue remained consistent period over period.

The revenue growth was primarily due to the inclusion of clinic revenue of $ 41.7 million as a result of the acquisition of Greenbrook, partially offset by the absence of sales to Greenbrook of $5.2 million and a $0.3 million decline in sales of NeuroStar Advanced Therapy Systems and treatment session revenue to customers other than Greenbrook.

U.S. NeuroStar Advanced Therapy System revenue for the six months ended June 30, 2025 was $6.3 million, a decrease of 13% compared to the six months ended June 30, 2024 revenue of $7.3 million. For the six months ended June 30, 2025 and 2024, the Company sold 72 and 89 systems, respectively, that were recognized as NeuroStar Advanced Therapy System capital revenue during each period. Additionally, for the six months ended June 30, 2024 the Company executed 1 operating lease agreement which contributed to operating lease revenue. While the number of systems decreased, the average selling price per system increased by 7%.

U.S. treatment session revenue for the six months ended June 30, 2025 was $20.4 million, a decrease of 17% compared to the six months ended June 30, 2024 revenue of $24.6 million. The decline was primarily attributable to the absence of $4.9 million in treatment session revenue to Greenbrook associated with the prior year quarter which was partially offset by an increase in treatment session volume with other customers, over the prior year quarter.

Cost of Revenues and Gross Margin

Cost of revenues increased by $28.0 million, or 325%, from $8.6 million for the six months ended June 30, 2024 to $36.6 million for the six months ended June 30, 2025. Gross margin decreased from 74.6% for the six months ended June 30, 2024 to 47.8% for the six months ended June 30, 2025. The decrease in gross margin was primarily a result of the inclusion of Greenbrook's clinic business and reduction in treatment session revenue.

Sales and Marketing Expenses

Sales and marketing expenses were consistent at $23.9 million for the six months ended June 30, 2025 and 2024.

General and Administrative Expenses

General and administrative expenses increased by $13.2 million, or 109% from $12.1 million for the six months ended June 30, 2025 to $25.3 million for the six months ended June 30, 2024. The increase was primarily driven by the addition of Greenbrook general and administrative expense of $12.6 million.

Research and Development Expenses

Research and development expenses decreased by $1.2 million, or 26%, from $4.6 million for the six months ended June 30, 2024 to $3.4 million for the six months ended June 30, 2025. The decrease in research and development was driven by personnel expense savings related to restructuring after the Company's acquisition of Greenbrook.

Interest Expense

Interest expense was marginally consistent at $3.8 million for the six months ended June 30, 2025 and 2024.

Other Income, Net

Other income, net decreased by $1.1 million from $1.5 million for the six months ended June 30, 2024 to $0.4 million for the six months ended June 30, 2025, primarily as a result of decreased interest income earned on the Company's money market accounts and notes receivable interest.

Liquidity and Capital Resources

Overview

As of June 30, 2025, we had cash and cash equivalents of $11.0 million and an accumulated deficit of $442.6 million, compared to cash and cash equivalents of $18.5 million and an accumulated deficit of $419.8 million as of December 31, 2024. We incurred negative cash flows from operating activities of $20.5 million and $17.0 million for the six months ended June 30, 2025 and 2024, respectively. We have incurred operating losses since our inception, and we anticipate that our operating losses will lessen in the near term due to revenue growth and the pursuit of ongoing cost efficiencies in connection with our Greenbrook acquisition. The Company's primary sources of capital to date have been proceeds from its IPO, private placements of its convertible preferred securities, borrowings under its credit facility, proceeds from its secondary public offerings of common stock and revenues from sales of its products. As of June 30, 2025, the Company had $60.0 million of borrowings outstanding under the Perceptive Facility, which have a final maturity on July 25, 2029. The Perceptive Facility is subject to certain financial covenants including a minimum net revenue covenant that escalates over the term of the Perceptive Facility and a minimum liquidity covenant.

If our cash and cash equivalents and anticipated revenues from sales or our products and services are insufficient to satisfy our liquidity requirements, we may seek to sell additional common or preferred equity or debt securities or enter into a new credit facility or another form of third-party funding or seek other debt financing. If we raise additional funds by issuing equity or equity-linked securities, our stockholders would experience dilution and any new equity securities could have rights, preferences and privileges superior to those of holders of our common stock. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. We cannot be assured that additional equity, equity-linked or debt financing will be available on terms favorable to us or our stockholders, or at all. It is also possible that we may allocate significant amounts of capital towards products or technologies for which market demand is lower than expected and, as a result, abandon such efforts. If we are unable to maintain our current financing or obtain adequate additional financing when we require it, or if we obtain financing on terms which are not favorable to us, or if we expend capital on products or technologies that are unsuccessful, our ability to continue to support our business growth and to respond to business challenges could be significantly limited, or we may be required to delay the development, commercialization and marketing of our products.

Our current and future funding requirements will depend on many factors, including:

As of June 30, 2025, there were no significant changes to our material cash requirements as set forth in our Annual Report on Form 10-K filed with the SEC on March 27, 2025.

Cash Flows

The following table sets forth a summary of our cash flows for the six months ended June 30, 2025 and 2024:

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Net Cash used in Operating Activities

Net cash used in operating activities for the six months ended June 30, 2025 was $20.5 million, consisting primarily of a net loss of $22.5 million and an increase in net operating assets of $3.7 million, offset by non-cash charges of $5.7 million primarily consisting of depreciation and amortization and share-based compensation. The increase in net operating assets was primarily due to increases in accounts receivable, and decreases in accounts payable, accrued expenses, prepaid expenses and other assets and prepaid commission expense.

Net cash used in operating activities for the six months ended June 30, 2024 was $17.0 million, consisting primarily of a net loss of $17.7 million and an increase in net operating assets of $5.1 million, offset by non-cash charges of $5.8 million. The increase in net operating assets was primarily due to decreases in our accrued expenses mainly from the 2024 bonus payment accrued as of December 31, 2023, increases in our accounts receivable offset by lower inventory levels from the prior year. Non-cash charges primarily consisted of depreciation and amortization, non-cash interest expense, allowance for credit losses and share-based compensation.

Net Cash used in Investing Activities

Net cash used in investing activities for the six months ended June 30, 2025 was $0.5 million, which was attributable to purchases of property and equipment and capitalized software costs.

Net cash used in investing activities for the six months ended June 30, 2024 was $0.1 million, which was attributable to purchase of property and equipment and capitalized software costs, partially offset by the repayment of notes receivable.

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Net Cash provided by Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2025 was $19.0 million and primarily consisted of net proceeds from our secondary public offering. There were no cash flows from financing activities for the six months ended June 30, 2024.

Indebtedness

For information regarding the Perceptive Facility, refer to "Debt" in Notes to Interim Consolidated Financial Statements located in Part I - FINANCIAL INFORMATION, Item 1. Financial Statements.

Recent Accounting Pronouncements

Refer to "Summary of Significant Accounting Policies" and "Recent Accounting Pronouncements" in Notes to Interim Consolidated Financial Statements located in Part I - FINANCIAL INFORMATION, Item 1. Financial Statements.

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